Beyond the Billable Hour: How AI and Client Demands Are Reshaping Professional Services

Why hourly billing is losing ground

For decades, legal, consulting and accounting firms billed by the hour. Labour time was linked directly to revenue. The approach worked when time was the main input and when work moved at human speed. In 2025, AI is beginning to change and weaken the link between worker-hours and output. 

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Technology shifts the cost base

‍Generative AI disrupts this model. With well curated AI prompts the time needed to complete a task drops across business functions and task categories. Currently, human expertise remains crucial to transform AI outputs with all their imperfections into completed work. However, the range of tasks that can be independently completed by AI is advancing rapidly. A global survey of professionals from across government and the private sector expects AI to save workers five hours a week. Another study found that for American Lawyers these AI time-savings could remove about $27,000 of billable time per lawyer each year. But when billable time is also revenue, what should these firms do? 

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Clients and staff favour fixed prices

‍The billable hour is under pressure from both supply and demand sides. In the legal sector, 71% of clients now prefer a single flat fee for a matter. In 2024 48% of accountancy firms used value pricing - using preset quotes for particular tasks - and a further 18% plan to add it this year. Teams welcome the change because output, not hours at a screen, earns credit.

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Adoption remains slow – but pays off

‍The billable hour has been declared ‘dying’ for years and yet it persists. A crucial reason is because revenue preferences are a part of business culture, and business culture changes slowly. Furthermore, time-billing rewards inefficiency. Firms may intentionally stretch tasks to maximise billing. Output-based billing, especially when paired with AI-driven efficiencies, will intensify competition by rewarding productivity over time spent. Firms that will prefer to lean into efficiency will be able to obtain significantly higher revenues and market share. 

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Examples of output-linked payment

‍Output-linked payments will take on many forms and names. These include fixed fees, value pricing and success fees. Regardless of the name, efficiency improvements on outputs will translate into revenue. In law you have no-win-no fee solicitors, while in healthcare, the NHS pays providers a tariff for each completed spell of care under Payment by Results. While these models have existed for years, AI-driven efficiencies are making them more attractive and viable. These models raise the ceiling of revenue scale without needing to recruit more employees. After all, there are only so many hours in a week. 

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Practical moves for firms

1. Map each service to an output the client recognises.
2. Pilot flat fees on low-risk work. 
3. Track throughput and client outcomes rather than hours.
4. Update engagement terms to spell out scope, milestones and completion triggers. 
5. Train staff on cost-to-serve so margin stays intact.

The billable hour is not dead, yet its primacy is fading. The next phase of professional services will be shaped by aligning price with results.

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